What Can Grant Funding Be Used For? A Guide for Nonprofits  

You found a grant that seems perfect for your nonprofit organization. 

But, there’s a problem. 

To implement the project, you need $40,000 for salaries, computers, and increased program delivery. 

The funder supports your cause. The grant amount is realistic. The organization appears to be eligible for funding. 

But can the grant actually cover these costs? 

This matter is important and frequently underestimated. 

The nonprofit grant funding can cover such expenses as: 

• Programs 
• Salaries 
• Operating costs 
• Equipment 
• Technology 
• Training 
• Research 
• Renovations 
• Professional services 
• Many other expenses of the organization 

However, here comes the crucial point: 

What grant funding can be used for depends on the specific funder, grant program and terms of the award. You first need to understand what grant funding is! 

An expense that is perfectly acceptable under one grant may not be allowed under another. 

That is why nonprofits should not assume that an expense is always eligible simply because another funder has paid for it before. 

If you are new to grant funding, start with our complete guide to grant funding and how it works. You can also read our guide to the types of grants for nonprofits to learn about program grants, operating grants, capital grants, capacity building and other types of funding. 

First, let’s focus on a different question: 

What can nonprofit grant money be used for? 

What Can Grant Funding Be Used for? 

Grant funding may cover the following expenses: 

• Salaries and benefits for staff 
• Program delivery 
• General operating expenses 
• Rent and utilities 
• Equipment 
• Technology and software 
• Supplies and materials 
• Professional services and consultants 
• Training and professional development 
• Travel and transportation 
• Research and evaluation 
• Marketing and communications 
• Capacity building 
• Building renovations and capital projects 
• Accessibility improvements 
• Community outreach 
• Participant expenses 
• Expansion of existing services 
• Pilot programs and new initiatives 

However, none of these expenses are always eligible under any grant. 

For example, in Canada, government grant and contribution programs may include costs such as personnel, salaries and benefits, goods, services, capital expenditures, travel, materials, training, rent, utilities, equipment, evaluation and overhead, depending on the individual program. And the Government of Canada clearly states that whether the cost is eligible or not is determined by the terms of the particular program guidelines or agreement. See the Government of Canada’s examples of eligible grant and contribution expenditures. 

The same goes for foundation funding. 

A foundation may provide unrestricted operating support that would give your organization a lot of flexibility. 

Another one may award a restricted program grant that can be used for expenses related to one particular project only. 

Grant agreement wins every time. 

Quick Answer: What Can Nonprofit Grant Money Pay For? 

Expense	Can a Grant Pay for It?	What to Check
Staff salaries	Often	Whether personnel costs are eligible and which positions can be charged
Rent and utilities	Sometimes	Whether operating or indirect costs are permitted
Program expenses	Often	Whether expenses directly support the funded program
Equipment	Sometimes	Purchase limits, ownership rules and whether capital costs are allowed
Technology/software	Sometimes	Whether technology is an eligible project, operating or capacity-building expense
Marketing	Sometimes	Whether communications/outreach directly support the funded work
Consultants	Sometimes	Professional-service rules and approved budget
Training	Often under relevant grants	Whether professional development supports the project or organization
Travel	Sometimes	Eligible destinations, mileage, airfare, lodging and reimbursement rules
Building renovations	Only under some grants	Whether capital expenses are permitted
General operating costs	Yes under some grants	Whether the grant provides operating or unrestricted support
Research/evaluation	Often under relevant grants	Whether research and evaluation are approved activities
Expenses already incurred	Often not	Whether retroactive costs are expressly permitted
Fundraising costs	Depends	Some funders specifically exclude fundraising expenses
Personal expenses	No	Grant funds must be used for the approved charitable or project purpose

The easiest rule is the following: 

Never decide whether an expense is eligible on the basis of the name of the grant alone. Read the funding guidelines, eligible-expense rules, approved budget and grant agreement. 

Can Grant Money Be Used for Salaries? 

Yes, grant money can be used for paying nonprofit salaries if the personnel costs are allowed under the grant and are connected to the work being funded. 

It is one of the most common questions nonprofits have about grant funding. 

And no wonder. 

Programs do not run themselves… wouldn’t that be nice?! 

If your nonprofit gets grant funding to expand a youth mentorship program, somebody needs to: 

• Coordinate the program 
• Recruit participants 
• Train volunteers 
• Deliver services 
• Manage partnerships 
• Collect data 
• Evaluate outcomes 
• Complete reporting 

All of these tasks require time and effort of the staff. 

And grant funding may allow your nonprofit to include some or all of these salary costs in the project budget. 

Some government grant programs specifically list wages, salaries and employee-related costs among eligible expenditures. For example, in Canada, the current government funding guidance allows for programs where wages, mandatory employment-related costs and professional development for project staff can be eligible expenses. See an example of eligible expenses from Canada Service Corps. 

It does not mean that every grant can be used for every staff member. 

For example, if a program grant funds 50% of a program manager’s salary because the employee devotes 50% of his/her working time to the funded project, the grant may not allow to charge the entire salary of an unrelated employee to the grant. 

When putting salaries in a grant budget, consider the following questions: 

• Are personnel costs eligible? 
• Who will work on the funded project? 
• How much time of these employees will be devoted to it? 
• Are benefits and payroll-related expenses eligible? 
• Is there a limit on personnel costs? 
• Does the funder require time tracking or other documentation? 

The main issue is not whether a grant can pay salaries. It is whether this particular grant can cover these particular salary costs. 

Can Grant Money Be Used for Operating Expenses? 

Yes, some grants can fund nonprofit operating expenses, but others are restricted to specific programs or projects. 

Operating expenses may include: 

• Salaries 
• Rent 
• Utilities 
• Insurance 
• Accounting 
• Administrative software 
• Communications 
• Office supplies 
• General technology 
• Financial management 
• Other organizational expenses 

Here, unrestricted and general support grants are especially important. 

According to the Council on Foundations, general support funding is defined as the funding that gives the recipient flexibility to allocate the resources throughout the organization rather than tying the money to one particular project. Read more about unrestricted and general support funding from the Council on Foundations. 

Compare it with a restricted program grant. 

If a foundation awards $50,000 to deliver a food-security program, the nonprofit is not allowed to use some of that money for unrelated organizational expenses. 

The approved budget and grant agreement determine what is allowed. 

Can Grants Pay for Rent? 

Yes, grants may sometimes cover rent expenses, but it depends on the funding structure and grant guidelines. 

Rent could fall into several categories. 

General operating support 

An unrestricted or operating grant may allow the nonprofit to use funding towards its regular occupancy expenses. 

Direct project expense 

Imagine that your nonprofit is renting a community space to deliver a program that is being funded. 

Then the rental expense will be a direct project cost. 

Indirect or overhead expense 

The regular office rent of your nonprofit may support many programs instead of one particular grant. 

So, a part of it may be an indirect or overhead cost if the funder allows it. 

In Canada, some government funding programs show good examples of this distinction. Some federal programs mention rent, utilities and overhead among potentially eligible expenses, while the individual programs may impose certain limitations. 

The key point here is not to assume. 

Find out whether the funder allows operating, occupancy or indirect costs and how these costs must be calculated. 

Can Grants Pay for Equipment? 

Yes, some grants can be used for equipment, but equipment costs may be subject to additional rules or limitations. 

The equipment grant for nonprofits may be used for: 

• Computers 
• Medical equipment 
• Tools 
• Kitchen equipment 
• Classroom equipment 
• Accessibility equipment 
• Program equipment 
• Furniture 
• Vehicles 
• Specialized machinery 

But equipment rules differ significantly. 

For instance, one funder may allow an organization to purchase $20,000 worth of equipment. 

Another one may only allow equipment rental. 

Another one may limit capital expenditures to a certain percentage of the total award. 

Another one may exclude equipment entirely. 

That is why nonprofits seeking capital grants or equipment grants should review more than the funder’s cause area. 

Learn whether the funder has provided support for similar purchases before. 

Can Grant Money Be Used for Technology? 

Yes, some nonprofit grant funding can be sometimes used for technology, including hardware, software, digital infrastructure and technology capacity building. 

Technology expenses in grants may include: 

• Computers 
• Tablets 
• Servers 
• Software subscriptions 
• CRM systems 
• Cybersecurity 
• Database improvement 
• Website development 
• Digital accessibility 
• Cloud services 
• Data systems 
• IT consulting 
• Staff technology training 

Technology grant funding may come through a dedicated technology grant, but can also be a part of: 

• Capacity building funding 
• Capital grants 
• Equipment grants 
• General operating support 
• Program funding 

For example, when your nonprofit implements a mobile outreach program, the tablets used by frontline workers will be a direct program expense. 

When your organization is planning to replace its whole internal CRM system, the same technology will be a capacity building need. 

The expense will be similar. The funding case will be different. 

Can Grants Pay for Program Expenses? 

Yes. Program expenses are among the most common uses of nonprofit grant funding. 

Depending on the program, grant funding may cover: 

• Program staff 
• Supplies 
• Participant materials 
• Transportation 
• Facility rental 
• Outreach 
• Training 
• Food 
• Professional services 
• Evaluation 
• Equipment 
• Accessibility equipment 
• Curriculum development 
• Community events 

It depends on the program. 

Both the youth development foundation and the environmental foundation may provide program grants, but they may have a completely different definition of acceptable expenses. 

So, when making a budget for a grant application, find out what the funder expects from every expense. 

Instead of: 

Supplies: $8,000 

The funder should understand why you need these supplies for producing the promised outcome. 

Can Grant Funding Be Used for an Existing Program? 

Yes. Some grants may be used for an existing nonprofit program. Grants are not necessarily aimed at brand-new initiatives. 

Funding may be used to: 

• Continue the program 
• Increase the number of beneficiaries 
• Extend services to a new location 
• Add staff 
• Improve the quality of the program 
• Increase accessibility 
• Add evaluation 
• Implement new technology 
• Respond to increased demand 

However, pay close attention to the funder’s language. 

Some grants are specifically intended for: 

New programs 

while others can fund: 

Existing programs, expansion, continuation or general operations. 

Do not turn a well-established 10-year program into a “new initiative” just because you think that sounds more fundable. 

Describe what the program is and how the new funding will change it. 

Can Grant Funding Be Used to Start a New Program? 

Yes. Many nonprofit grants support new programs, pilot projects and program expansion. 

A funder may want to know: 

• What problem is the program supposed to address? 
• Why is it needed? 
• Who will participate in the program? 
• What will the program do? 
• How much will it cost? 
• What outcomes do you expect? 
• How will you measure the results? 
• What will happen when the grant ends? 

New programs are attractive, but novelty alone cannot be a funding strategy. 

Your nonprofit has to prove that the program fits the priorities of the funder and that your organization has the ability to implement it. 

Can Grants Pay for Marketing and Communications? 

Sometimes. Marketing and communications expenses may be eligible if they support the purposes of the grant. 

They may include: 

• Community outreach 
• Recruitment materials 
• Program advertising 
• Educational campaigns 
• Printing 
• Digital communications 
• Website pages related to the project 
• Translation 
• Public awareness materials 
• Social media promotion associated with the funded initiative 

However, there is a difference between: 

Promoting the program the funder is paying for and paying for your organization’s entire marketing strategy. 

The first option may be accepted while the second one may be rejected. 

For example, some government grant programs specifically allow communications or outreach costs, while other programs limit advertising or fundraising-related expenses. In Canada, the current government funding guidelines show that the eligibility may vary greatly between programs. 

Can Grant Money Pay for Consultants? 

Yes. Consultant and professional services costs may be eligible under some grants. 

They may include: 

• Strategic planning consultants 
• Evaluators 
• Researchers 
• Trainers 
• Technology consultants 
• Facilitators 
• Designers 
• Engineers 
• Accountants 
• Subject-matter experts 

Some government grant programs specifically mention consultants and professional fees as eligible project expenses. 

However, remember that the context is very important. 

A $15,000 evaluation consultant may be completely reasonable in the grant requiring formal evaluation, but the exact same expense may be not allowed under another grant. 

When the consultant costs are included, provide the following information: 

Who is needed, what he/she will do, why the expertise is needed and how the cost was estimated. 

Can Grants Pay for Training and Professional Development? 

Yes, some grants may support training and professional development for nonprofit staff, volunteers, board members or program participants. 

They may include: 

• Leadership training 
• Staff certification 
• Trauma-informed-care training 
• Technology training 
• Board development 
• Financial management training 
• Fundraising capacity 
• Program-specific certification 
• Safety training 
• Professional development workshops 

These expenses may be especially relevant for capacity building grants. 

However, the training should be related to the purposes the funder supports and not simply to the internal development. 

The best case is not: 

Our staff will benefit from the training. 

It is: 

This training will help us to implement the program/project more effectively and achieve the desired outcome. 

Can Grants Pay for Travel and Transportation? 

Sometimes. Travel and transportation expenses may be eligible if they are reasonable, necessary and directly related to the funded work. 

They may include: 

• Mileage 
• Public transportation 
• Airfare 
• Hotels 
• Program transportation 
• Participant transportation 
• Staff travel 
• Conference travel 
• Site visits 

Some funders put restrictions on: 

• Mileage rate 
• Airfare class 
• Accommodation 
• Meals expenses 
• International travel 
• Number of travelers 

Do not assume that the same travel policy your organization follows internally will satisfy the funder’s requirements. 

Can Grants Pay for Research and Evaluation?  

Research, data collection, and program evaluation may all be valid uses of grant funding if they are related to the purpose of the grant award itself. 

Funding may pay for: 

• Surveys 
• Data analysis 
• Research personnel 
• External evaluators 
• Focus groups 
• Needs assessments 
• Impact assessment 
• Program evaluation 
• Research equipment 
• Participant incentives, when allowed 

Evaluation is especially valuable because the funder wants to know what the difference was as a result of the program. 

That doesn’t mean that all nonprofits need to hire an expensive external evaluator. 

The level of evaluation must match the scale and expectations of the grant. 

Can Grant Money Be Used for Facility Improvements or Renovations? 

Yes, but typically only if capital spending is allowed by the funder. 

Funding for buildings and facilities could include: 

• Renovations 
• Construction 
• Accessibility features 
• New roofs 
• HVAC systems 
• Community facilities 
• Expansion 
• Property improvements 
• Safety features 

These are normally seen as capital funding needs. 

There are grants that specifically target capital projects. 

Other grants specifically prohibit capital funding. 

Government grant budgets also tend to categorize capital/construction costs separately from other costs. That is one reason why nonprofits should consider the rules of the funding source prior to including these costs. For example, Grants.gov maintains separate federal budget information for construction grant programs. See construction budget categories on Grants.gov. 

If your nonprofit is trying to obtain money for a facility or renovation project, investigate funders that historically provide capital grants to nonprofits rather than all foundations supporting your field. 

What Are Indirect Costs of a Grant? 

Indirect costs are the organization costs related to performing the project that are not easy to attribute directly to one particular project. 

Examples of indirect costs may be: 

• Rent 
• Utilities 
• Accounting 
• Administrative support 
• IT 
• Insurance 
• Executive oversight 
• Human resources 

Consider your organization having five different programs operating from one office. 

The utility bills cover all five. 

It would make no sense to put the whole amount to one program budget, however, some funding agreements may allow a share of such expenses. 

Indirect costs vary greatly among different funders. 

Some allow specific percentage, some require an approved indirect cost approach, some allow to include actual allocated costs, some disallow them at all. 

Do not include arbitrary overhead percentage in your grant budget without checking the funder guidelines. 

Can Grant Funding Be Used for Fundraising? 

Sometimes, however, fundraising costs are usually restricted by certain grant programs. 

A grant for general support from a foundation may offer much more flexibility than a government grant tied to the specific project. 

There are even government programs that prohibit certain expenses in the application, including fundraising. Here is an example of an Employment and Social Development Canada program, where fundraising expenditures are included among ineligible expenses. Here is how the Government of Canada describes examples of eligible and ineligible grant expenditures. 

So when you want to use grant money for: 

• Fundraising software 
• Development personnel 
• Campaigns 
• Events 
• Writing grants 
• Consulting on fundraising 

Do not just assume the expense is eligible because you need the money for the overall fundraising efforts of your nonprofit. 

Can Grants Cover Previously Incurred Expenses? 

No, unless the funder specifically allows it. 

This is an essential point to remember. 

Let’s imagine your nonprofit spent $20,000 on equipment purchase in January. 

In March, you found a grant covering equipment purchases. 

Your organization is not eligible to receive this grant and then use it to reimburse its expenses. 

Many funding agreements specifically require eligible expenses to be incurred during the grant period. 

Here is an example of Canadian government programs, where expenditures incurred before the program or project start date are ineligible unless otherwise authorized. Check out the Canadian government example. 

So when you are planning to make any purchase before receiving a funding announcement, check the guidelines first. 

Restricted vs Unrestricted Grant Funding 

In order to determine what grant money can be used for, you have to understand the concept of restricted vs unrestricted funding. 

Restricted grant funding 

As the name implies, restricted grant funding must be used for the agreed purpose. 

Example: 

$50,000 to expand the organization’s youth literacy program. 

The organization has to spend the money in accordance with the restriction and grant agreement terms. 

Unrestricted grant funding 

Unrestricted funding leaves the organization much more room in spending the money. 

The funding may cover: 

• Salaries 
• Operations 
• Administration 
• Programs 
• Technology 
• Infrastructure 
• etc. 

according to the terms of the award. 

What Cannot Grant Money Be Used For? 

There is no universal list of expenses that are always restricted or prohibited under any nonprofit grant. 

Depending on the specific funder, some examples of restricted or ineligible expenses include: 

• Pre-award expenses 
• Expenses unrelated to the funded purpose 
• Personal expenses 
• Fines and penalties 
• Debt repayment 
• Loan interest 
• Some fundraising expenses 
• Political activities 
• Entertainment 
• Alcohol 
• Land purchases 
• Construction of buildings 
• Purchases of vehicles 
• Capital purchases 
• Expenses already covered by another source 

The fact that AN expense appears on this list does not necessarily mean that this expense is always restricted under any grant program. 

The case with capital expenses is a good example. 

While some grants are designed specifically for renovation of nonprofit facilities, others explicitly prohibit constructions. 

That is why you should focus on eligible expenses for the specific award rather than try to determine whether the expense is generally prohibited under any grant program. 

How to Determine the Purpose of the Grant? 

Before applying, look for sections called: 

• Eligible expenses 
• Eligible costs 
• Allowable costs 
• Ineligible expenses 
• Use of funds 
• Funding restrictions 
• Budget guidelines 
• Grant conditions 
• Terms and conditions 

Then consider five questions: 

1. Is the expense explicitly allowable? 

If yes, great. 

You should still check for possible percentage or cap restrictions, however. 

2. Is the expense explicitly prohibited? 

If the funder prohibits the expense, do not try to argue. 

3. Is the expense directly related to the funded purpose? 

You should be able to explain why you need the cost. 

4. Is this expense consistent with the funder’s past funding? 

This point is particularly helpful when researching a private foundation. 

Examine their previous grants. 

Have they funded: 

• Programs? 
• General operation? 
• Equipment? 
• Capital projects? 
• Capacity building? 
• Technology? 
• etc. 

Funding history of the foundation may tell much more than its general description like “education” or “community development”. 

Grant Advance Foundation Profile Pages allow nonprofits to research previous grants, grant amounts, giving history, foundation directors and other important information before deciding whether the foundation is a good candidate for funding. 

5. Is your request in the typical range of this funder’s grants? 

Even if the expense is eligible for the funder, you have to make sure that your request is not too big for the particular foundation. 

For example, if the foundation typically gives grants between $5,000 and $15,000, requesting $500,000 grant for a building renovation may not be the best fit. 

Our guide how to qualify foundations for nonprofit grants covers the other factors that nonprofits should consider before applying to a foundation. 

Start With the Need, Then Find the Funder 

One of the most common mistakes in grant research is to start with: 

What grants are available? 

and then try to find something your nonprofit needs. 

Reverse this logic. 

Start with: 

What do we actually need funding for? 

Maybe you need: 

• $75,000 for two program staff 
• $20,000 for new technology 
• $250,000 for building renovation 
• $15,000 for training 
• $50,000 to expand existing program 
• Flexibly-funded operating expenses 

Once you identified the need, you can search for funders whose priorities and giving history match this need. 

This approach is much more targeted. 

Rather than searching for “nonprofit grants” broadly, you can identify those foundations that have a history of funding organizations similar to yours for similar needs. 

Grant Advance’s grant search engines for nonprofits enable organizations to research foundations’ giving history, previous recipients, geography, grant amounts and other relevant information to narrow down the search. 

If you are just beginning to build your list of funding prospects, you can read our guide how to find foundations for grants. 

What Should You Consider Before Including an Expense in Your Grant Application? 

Before adding any expense to your grant budget: 

1. Read the funder eligibility guidelines. 

Do not just rely on the title of the grant. 

2. Check if the expense is explicitly prohibited by the funder. 

Sometimes it is more informative than eligible list. 

3. Research previous grants from the funder. 

Identify the evidence of their interest in funding the need. 

4. Include the expense in the project logically. 

Every major cost should have a reason. 

5. Make sure the expense amount is realistic. 

Estimate the costs based on real data, not guesses. 

6. Review the funding period of the grant. 

Make sure the expense will occur during the period of funding. 

7. Document the expenses. 

Depending on the award, the successful grant management may require invoices, payroll records, receipts, time records, reports and other documentation. 

As soon as your organization starts managing several grant opportunities, it becomes crucial to develop an efficient grant management process. Grant Advance’s grant management software helps nonprofits to organize grant applications, track deadlines and important actions related to grant management in one place. 

When you are ready to research private foundations that have giving history that matches what your nonprofit needs, book a consultation with Grant Advance. We will help you to research previous grants, giving pattern, grant amounts and potential funders. 

Frequently Asked Questions About What Grant Funding Can Be Used For 

What can grant funding be used for? 

Grant funding may cover nonprofit programs, salaries, operating expenses, rent, equipment, technology, supplies, training, consultants, research, evaluation, travel, capacity building and capital projects. Specific allowed expenses depend on the funder’s guidelines and grant agreement. 

Can grant money be used for salaries? 

Yes, some grants allow using grant funding for nonprofit personnel salaries and benefits. Personnel expenses may have to be directly related to the funded project or included in approved operating budget. 

Can grant money be used for operating expenses? 

Yes. Operating support and unrestricted grants may allow funding salaries, rent, utilities, insurance, administration and technology expenses. Project grants may have less flexibility in this regard. 

Can grants pay for rent? 

Sometimes. Rent may be an eligible operating, project or indirect cost depending on the funder and grant agreement terms. 

Can grants pay for equipment? 

Yes, some grants fund equipment purchase or rental. There are some grants that restrict or prohibit equipment expenses, so nonprofits should check the guidelines before applying. 

Can grant money be used for technology? 

Yes. Some grants may cover nonprofit software, computers, cybersecurity, digital infrastructure, databases, technology for people with disabilities, and other technology expenses. Technology may be funded through technology, capacity building, equipment, capital, program or operating grants. 

Can grants be used for existing programs? 

Yes. Grants may support continuation, improvement, and expansion of existing programs of a nonprofit. There are also grants that specifically target new or pilot projects. 

Can grants pay for building renovations? 

Sometimes. Capital grants may fund construction, renovations, facility upgrade and major equipment purchases. Program grants often do not allow capital expenses. 

Can grant money be used for fundraising? 

It depends. Some unrestricted funding may be quite flexible regarding allowable expenses. Some government and project-specific grants explicitly prohibit fundraising expenses. 

Can grant money pay for expenses incurred before the award? 

Not usually. Many funders only allow expenses incurred during the grant period. Some programs allow certain pre-award or retroactive expenses, but this is never assumed.